Dairy volatility: it really hasn’t gone away you know!

Published:10:00Saturday 04 March 2017

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The proposals kicked into play last week by Holstein UK, aimed at tackling future volatility within the dairy sector, are worthy of merit.

They are based on the premise that compensating farmers for taking relatively small volumes of milk out of production within Europe - at times when pressure comes on international dairy prices - will help stabilise markets overall.

And I don’t think anyone can argue with this approach, given the success of the recent milk production reduction scheme.

Adding to the attraction of the Holstein UK proposals is the fact that producers themselves would pay into the kitty by way of a small levy. And, on that basis, no one can point the finger and suggest that farmers are, yet again, looking for a free ‘get me out of jail’ card.

No scheme will ever be perfect. But contrast this with the absolute silence from Dairy UK and the other stakeholders within the milk sector, who committed to come up with proposals on tackling dairy volatility in the wake of the conference dedicated to this very subject, which was held in Lisburn almost a year ago.

Yes, producer milk prices have strengthened a fair bit since then. But all the market analysts that have a view on the matter are still saying that volatility is still a major driver within the dairy sector. So we need a plan: irrespective of whether or not we remain in the EU.

In fact, Brexit may only serve to accentuate the problems caused by volatility if the UK signs up to free trade agreements with countries such as New Zealand and the United States.

Those who favour Brexit point to the 60m plus residents of GB as the farming industry’s ‘ticket to sustainability’. But, in truth, this will count for nothing if that market is flooded with cheap dairy products and other food stuffs over the coming years.

The next time milk prices crash we may well be out of the EU. For those who don’t follow history that closely, I should point out that the UK authorities have a bad track record when it comes to rescuing any industry from the depths of despair.

And, of course, the option of running to Brussels for help will not be available to us at that stage.

So, yes, we definitely need to come with a plan that allows the dairy sector to cope with the challenge of long term volatility. And that clock is ticking!